Final Test
Ron has a life insurance policy with a face value of $100,000 and a cost of living rider. If the consumer price index has gone up 4%, how much may Ron increase the face value of the policy?
$4,000
Greg has recently been terminated from his job that covered him for group life insurance. How long does he have to convert to an individual policy?
31 days
A rollover from a Traditional IRA to another IRA MUST be done within _____ days to avoid tax consequences
60
An attending physician's statement would be appropriate for which life insurance purpose? Attending physician's statements are mandatory during the application process
At the request of the insurer to assist in the underwriting decision
An insurer has a right to screen applicants for HIV in which of the following ways?
Blood test for HIV
Which of the following is NOT part of an insurance contract?
Certificate of Authority
Peter has a policy where 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index. What kind of policy is this?
Equity index whole life
How are annuities given favorable tax treatment?
Gains are taxed at distribution
Which of the following protects a policyowner from a misrepresentation casused by an innocent mistake?
Incontestable clause
What kind of life covers two or more people with the death benefit payable upon the last person's death?
Last survivor life insurance
Joanne has a $100,000 whole life policy with an accumulated $25,000 of cash value. She would like to borrow $15,000 against the cash value. Which of the following statements is TRUE?
Net death benefit will be reduced if the loan is not repaid
What is an insurance policy's grace period?
Period of time after the premium is due but the policy remains in force
What is the primary reason for buying an annuity?
Provide future economic security
Which market index is normally associated with an indexed annuity's rate of return?
S & P 500
How soon can the benefit payments begin with a deferred annuity?
a minimum of 12 months after date of purchase
Which of the following is an example of the insured's consideration?
a paid premium
What is the primary purpose of a rating service company such as A.M. Best?
determine financial strength of an insurance company
Which settlement option involves having the proceeds remain with the insurer and earnings paid on a monthly basis to the beneficiary?
interest only
A type of insurer that is owned by its policyowneners is called
mutual
An insurance producer decides to conduct business under an assumed name. The Commissioner MUST be notified of this change
prior to using the assumed name
Kurt is an active duty serviceman who was recently killed in an accident while home on leave. Which military service exclusion clause would pay upon his death?
results
A life insurance policyowner does NOT have the right to
revoke an absolute assignment
What does the word "level" in Level Term describe?
the face amount
Which of the following is NOT information found in a life insurance buyer's guide? how to compare life insurance policy rates how to compare life insurance policy requirements how to determine how much life insurance to purchase
how to take legal action against an insurance company
How is the cost of a policy affected when a policy owner pays premiums more frequently?
increases
How do insurers predict the increase of individual risks?
law of large numbers
The automatic premium loan provision authorizes an insurer to withdraw from a policy's cash value the amount of
past due premiums that have not been paid by the end of the grace period
What type of rider will waive the premium on a child's life insurance policy if the parent paying the premium dies?
payor benefit
Which of these is considered to be a document that describes the critical segments of a life insurance policy?
policy summary
Which of the following describes a person who is NOT acceptable by an insurer at standard rates because of health history, occupation, or hobbies?
substandard risk
How long must an individual be unable to engage in any gainful activity due to physical or mental disability in order to qualify for Social Security Total Disability?
12 months
Which of these is considered to be a Living Benefit option in a life insurance policy?
Accelerated death benefit
When does a life insurance policy typically become effective?
When initial premium is collected and policy is issued.
An individual most likely will have an insurable interest in insuring a person's life if
an economic interest exists for the continuance of the insured's life
Why are dividends from a mutual insurer not subject to taxation?
because dividends are considered to be a return of premium
A provision that allows a policyowner to temporarily give up ownership rights to secure a loan is called a(n)
collateral assignment
A producer who sells most of his/her insurance policies to family members is said to be engaging in
controlled business
Which of these is NOT subject to income taxation under a Modified Endowment Contract (MEC)? loan against the cash value policy withdrawal policy dividend
death benefit
In what part of an insurance policy are policy benefits found?
declarations
The least expensive option to pay off a 30-year mortgage balance would be
decreasing term life
Advertising regulations exist in order to
demonstrate full and truthful disclosures to the public
What is the purpose of the Louisiana Life and Health Insurance Guaranty Association?
ensures that claims filed against insolvent insurance companies will be paid
Andy the annuitant dies before the annuity start date. Which of the following is a TRUE statement?
premiums paid plus interest earned is returned to the beneficiary
Which of these is NOT an Unfair Claims Settlement Practice? refusing to pay a claim without conducting a reasonable investigation compelling an insured to initiate a lawsuit a lawsuit by offering less on an insurance claim failing to acknowledge and act promptly with respect to an insurance claim
settling a claim by arbitration
Which of the following actions by a producer would NOT result in a license suspension or revocation? found guilty of misrepresentation in obtaining the license misrepresenting the terms of an existing insurance contract misappropriating an insured's premium payment
sharing commissions with other licensed producers
An immediate annuity has been purchased with a single premium. When does the annuitant typically begin receiving benefit payments?
1 month
How long after its effective date will an individual life insurance policy become incontestable?
2 years
An insurer need NOT pay interest on death benefits if the proceeds of the life policy are paid within
20 days after the date of the death of the insured
A producer must notify the Commissioner within _____ days of a felony conviction.
30
The required grace period for a life insurance policy sold in Louisiana is ______ days.
30
Within how many days must a licensee submit a change in address?
30
A rollover from a Traditional IRA to another IRA MUST be done within _______ days to avoid tax consequences.
60
Sharon is the policyowner of a $50,000 life insurance policy. Her son, Mike, is the beneficiary. If Sharon MUST obtain Mike's signature in order to change the beneficiary, what kind of beneficiary designation is this?
Irrevocable
Which type of annuity guarantees a stated number of income payments, whether or not the annuitant is still alive to receive them?
Life annuity certain
Dana is an employee who deposits a percentage of her income into her individual annuity. Her company also contributes a percentage into a separate company pension plan. What kind of annuity is this considered?
Qualified retirement annuity
Reggie purchased a life insurance policy with a face amount of $500,000. After 15 years, the cash value has accumulated to $100,000 and the policy's face amount has become $600,000. Which type of life insurance policy is this?
Universal life
Upon policy delivery, which of the following must a producer have an applicant sign if no initial premium was collected with the life insurance application?
a good health statement
A single premium cash value policy can be described as
a policy that is paid up after only one payment
Replacement can be defined as
a transaction in which a new life insurance policy is purchased and an existing life insurance policy is surrendered
The double indemnity provision in a life insurance policy pertains to an insured's death caused by a(n)
accident
All of these are valid policy dividend options for a life insurance policyowner EXCEPT cash outlay to the policyowner reduction in policy premium buy additional insurance coverage
accumulate without interest
Which dividend option would an insurer invest the policyowner's money and add any interest earnings as the dividends accrue?
accumulation at interest option
A policyowner may change two policy features on what type of life insurance?
adjustable life
An underwriter's primary responsibility to an insurer is to protect against
adverse selection
An error was made on Mary's life insurance application. Which of the following areas do errors commonly occur on applications and for which the incontestable clause does NOT apply? Marital status Address Income
age
A change in an insurance application requires
an initial made by the applicant
Which of the following is considered to be the period when the accumulated value in an annuity is paid out?
annuitization phase
Fixed period settlement options are considered to be a form of a(n)
annuity
A licensed producer MUST be _____ be an insurer to be eligible for soliciting insurance contracts.
appointed
Before a producer may sell, solicit, or negotiate insurance for an insurer, the producer must have a(n)
appointment
Which of the following is NOT part of an insurance contact? policy application riders
certificate of authority
An example of unfair discrimination would be
charging different premiums for policyholders in the same risk classification
All of the following are elements of an insurance policy EXCEPT definitions other insurance conditions
claim forms
________ is NOT an element of a valid contract.
countersignature
A life insurance policyowner was injured in an automobile accident which results in a total and permanent disability. Which rider would pay a monthly amount because of this disability?
disability income rider
Life insurance replacement can be defined as
exchanging an existing life policy for a new policy
When the principal gives the agent authority in writing, it's referred to as
express authority
An example of an Unfair Claims Settlement Practice is
failing to promptly provide reasonable explanations for the denial of claims
A spouse and child can be added to the primary insured's coverage as what kind of rider?
family term
All of these are characteristics of a universal life insurance policy EXCEPT flexible death benefit flexible premiums builds cash value
fixed surrender value
All of these are characteristics of a universal life insurance policy EXCEPT flexible death benefits flexible premiums builds cash value
fixed surrender value
Which of these annuities require premium payments that vary from year to year?
flexible premium deferred annuity
A cease and desist order
forbids a stated practice listed in the order
A tax-free Section 1036 Exchange of a life insurance policy to a different policy is permitted if it occurs
from insurer to insurer and no cash is received by the policyowner
When a qualified plan starts making payments to its recipient, which portion of the distributions is taxable?
gains
Underwriters can acquire information from all of the following sources EXCEPT Medical Information Bureau (MIB) consumer reports attending physician's statements
genetic testing
A business will typically use which type of life insurance to cover their employees?
group policy
A life insurance rider that allows an individual to purchase insurance as they grow older, regardless of insurability, is called a(n)
guaranteed insurability rider
An annuitant is guaranteed to NOT outlive their benefits with a(n)
guaranteed lifetime withdrawal benefit
Fixed annuities provide all of the following EXCEPT guaranteed interest retirement funds tax advantage
hedge against inflation
Maria the producer would like to advertise an annuity product on a highway billboard. Which of the following must be included on the advertisement?
her name
Mike has inherited his father's traditional IRA. As beneficiary, he will pay ____ taxes on any money withdrawn.
income
A foreign insurance company doing business in Louisiana
is a company that was formed under the laws of another state
An alien insurer
is an insurer that is chartered by a foreign country, but is licensed to operate in the state is an insurer operating in the U.S. but headquartered outside the U.S.
What is the purpose for having an accelerated death benefit on a life insurance policy?
it allows for cash advances to be paid against the death benefit if the insured becomes terminally ill
What happens to interest earned if the annuitant dies before the payout start date?
it is taxable
Which of the following would disqualify a company's retirement plan from receiving favorable tax treatment?
it is temporary
A life insurance policy written on one contract for two people in which it is payable upon the first death is called
joint
What kind of life insurance policy covers two or more people with the death benefit payable upon the last person's death?
last survivor life insurance
Which of these is NOT considered to be a common life insurance nonforfeiture option? cash surrender extended term insurance reduced paid-up insurance
life income annuity
A limited payment whole life policy provides
lifetime protection
A permanent life insurance policy where the policyowner pays premiums for a specified number of years is called a(n)
limited pay policy
A life insurance policy that has premiums fully paid up within a stated time period is called
limited payment insurance
Insurance premium is determined by each of the following factors EXCEPT mortality interest expenses
liquidity
A guaranteed issue insurance policy has no
medical underwriting
The suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy's inception, the insurer will only be liable for a return of premiums paid
minus indebtedness and without interest
An insurance producer who convinces a prospective insured to purchase a policy by exaggerating the benefits of the policy may be found guilty of
misrepresentation
Which of the following is NOT a requirement to obtaining a Louisiana insurance producer license? must complete a prelicensing course must be age 18 must submit the application with fees
must be age 21
A whole life policy option where extended term insurance is selected is called a(n)
nonforfeiture option
A business entity wishing to act as an insurance producer MUST
obtain a producer's license
How do interest earnings accumulate in a deferred annuity?
on a tax-deferred basis
What makes an insurance policy a unilateral contract?
only the insurer is legally bound
Which of these describes the result of a modified endowment contract that failed to meet the seven pay test?
pre-death distributions are typically taxable
An individual who has a contract with an insurance company to represent it is called a(n)
producer
Upon receipt of proof of loss, an insurer MUST pay a life insurance death benefit claim
promptly
In order to activate the reinstatement clause of a lapsed life insurance policy, the insured MUST remit all past-due premiums within the grace period resubmit a new life insurance application provide a valid reason for the lapse
provide evidence of insurability to the insurer
The two major actions required for a policyholder to comply with the Reinstatement Clause are
provide evidence of insurability, pay past due premiums
How are survivorship life insurance policies helpful in estate planning?
provide funds to help pay taxes
Karen the producer pays for her client's initial premium payment as an incentive for purchase. This act is considered a
rebate
A nonresident producer from a state outside of Louisiana may become licensed in Louisiana IF a(n)
reciprocal arrangement exists with the state of domicle
A policyowner may exercise which of these dividend options that uses the dividend to pay all or part of the next premium due?
reduction of premium dividend option
What is the automatic continuance of insurance coverage referred to as?
renewal
What are an applicant's statements concerning occupation, hobbies, and personal health history regarded as?
representation
According to Louisiana law, group life insurance conversion privileges must NOT
require evidence of insurability
According to Louisiana law, group life insurance conversion privileges must NOT allow a new policy to be issued allow a time period to convert group life coverage to an individual life policy allow a rate increase
require evidence of insurability
An endorsement found in an insurance plan which modifies the provisions of the policy is called a
rider
An endorsement found in an insurance plan which modifies the provisions of the policy is called a(n)
rider
Kiara filled out a life insurance application and was given a policy illustration that showed future premiums being paid out of nonguaranteed values. This illustration MUST disclose that
she may need to resume payments, depending on actual results
Kristi purchases an annuity that will pay her husband an income for 15 years. If he dies, this income will become payable to their children for the remainder of the period. Kristi has what kind of annuity?
temporary annuity certain
When calculating the amount of life insurance needed for an income earner, what has to be determined when using the Needs Approach?
the family's financial objectives if the income earner were to die or to become disabled
An insured individual and the policy's beneficiary die from the same accident. The common disaster provision states the insurer will continue as if
the insured outlived the beneficiary
Who assumes the investment risk with a fixed annuity contract?
the insurer
If the annuitant dies before the annuity start date,
the premiums paid plus interest earned will be given to the beneficiary
Dorian exercised a nonforfeiture option by using his life policy's cash value to purchase an extended term insurance option. When the term insurance expires,
the protection ends
The free-look provision gives the policyowner
the right to return the policy for a full refund within a specified number of days
Terminally-ill life insurance policyowners may sell their policy at a discount to a third party. This type of agreement is called a
viatical settlement
A policyowner can receive an immediate payment before the insured dies by using a(n)
viatical settlement contract
All of the following riders can increase the death benefit amount EXCEPT cost of living accidental death rider guaranteed insurability
waiver of premium
All of the following riders can increase the death benefit amount EXCEPT cost of living accidental death rider guaranteed insurability
waiver of premium
All of these statements concerning whole life insurance are false EXCEPT Policyowner can take out a policy loan up to the face amount Coverage is normally temporary the death benefit is not affected by outstanding loans
when a whole life policy is surrendered, income takes may be owed
All of these statements concerning whole life insurance are false EXCEPT policyowner can take out a policy loan up to the face amount coverage is normally temporary the death benefit is not affected by outstanding loans
when a whole life policy is surrendered, income taxes may be owed
Which of these would be the best example of a limited pay life insurance policy?
whole life policy with premiums paid up after 20 years
A renewable Term Life Insurance policy allows the policyowner the right to renew the policy
without producing proof of insurability
Loans obtained by a policy owner against the cash value of a life insurance policy
would not be treated as taxable income
Loans obtained by a policyowner against the cash value of a life insurance policy
would not be treated as taxable income
James is the insured on a life insurance policy where his age was misstated on the application. Which of the following is CORRECT regarding the death benefit amount?
The death benefit paid will be what the premium would have purchased at the correct age
Pat owns a 20-pay life policy with a paid-up dividend option. Which of the following statements is true?
The policy may be paid up early by using policy dividends.
______ life is designed to pay the balance of a loan if the insured dies before repayment of the loan.
Credit
Lisa has recently bought a fixed annuity. Which of these is considered to be a disadvantage of owning this type of annuity?
During periods of inflation, annuitants will experience an increase in purchasing power of their payments
Life insurance policies will normally pay for losses arising from
commercial aviation
A life insurance policyowner was injured in an automobile accident with results in a total and permanent disability. Which rider would pay a monthly amount because of this disability?
disability income rider
Which of the following is NOT a requirement to obtaining a Louisiana insurance producer license? must complete a prelicensing course must be age 18 must submit the application with fees
must be age 21
A life insurance claim which involves a per capita distribution of policy proceeds would be payable to the
named living primary beneficiaries
A life insurance policy sold in Louisiana can be contested by the insurer only during the first ____ years of the contract.
two
Ambiguities in an insurance policy are always resolved in favor of the
insured
How does one qualify as a fully-insured individual under Social Security disability coverage?
individual has been credited with the appropriate number of quarters of coverage
Bob and Tom start a business. Since each partner contributes an important element to the success of the business, they decide to take life insurance policies out on each other, and name each other as beneficiaries. Eventually, they retire and dissolve the business. Bob dies 12 months later. The policies continue in force with no change. Both partners are still married at the time of Bob's death. In this situation, who will receive Bob's policy proceeds?
Tom
Which policy feature makes a universal life policy different from a whole life policy?
a flexible premium schedule
All of these are valid options for an Adjustable Life Policy EXCEPT The policy's premium can be increased or decreased The policy's death benefit can be increased or decreased The policy's protection period can be modified
a nonforeiture option can be used to increase the death benefit
If an insured's age on a life insurance policy has been misstated, what is the insurer's liability if the insured dies?
a prorated death benefit based on the amount of insurance the insured's premiums would have been if purchased at the correct age
Which of the following would be considered an underwriting duty of an agent?
completing all applications and collecting initial premiums
All of the following actions are considered rebating EXCEPT offering a country club membership as an inducement to purchase insurance offering employment as an incentive to purchase insurance giving back commissions to a client
sharing commissions with other producers
All of the following are exempt from the 10% tax penalty for early qualified plan withdrawals EXCEPT qualified college expenses first time home purchase death of the participant
stock purchase
What types of life insurance are normally used for key employee indemnification?
term, whole, and universal life insurance
A licensed producer MUST be _______ by an insurer to be eligible for soliciting insurance contracts.
appointed
Before a producer may sell, solicit, or negotiable insurance for an insurer, the producer must have a(n)
appointment
Under a life insurance policy, what does the insuring clause state?
the insurer's obligation to pay a death upon an approved death claim
A whole life insurance policy accumulates cash value that becomes
the policy loan value which the insured may borrow against
If an insured dies during the grace period with no premiums paid
the policy would be payable, minus the premium amount
A life insurance policy that contains a guaranteed interest rate with the chance to earn a rate that is higher than the guaranteed rate is called
universal life
A partial surrender is allowed in which of the following life policies?
universal life
A securities license is required for a life insurance to sell
variable life insurance
Which type of policy combines the flexibility of a universal life policy with investment choices?
variable universal life policy
Which type of life insurance offers flexible premiums, a flexible death benefit, and the choice of how the cash value will be invested?
variable universal policy
Which of these requirement for obtaining a resident insurance producer license in this state?
pass the appropriate examination
Which of the following describe a person who is NOT acceptable by an insurer at standard rates because of health history, occupation, or hobbies?
substandard risk
________ life is designed to pay the balance of a loan if the insured dies before repayment of the loan.
credit
Jim recently sold his whole life insurance policy under a viatical settlement contract. The proceeds of this contract could be subject to the claims of
creditors
All of these are standard exclusions found in a life insurance policy EXCEPT hazardous occupations aviation war
disability
What is the name of the provision which states that a copy of the application must be attached to the policy when issued?
entire contract
Which of these would limit a company's liability to provide insurance coverage?
exclusion
A provision that allows a policyowner to withdraw a policy's cash value interest free is a(n)
partial surrender
Which of the following is an annuity that is linked to a market-related index?
equity-indexed annuity
How often must an insurance producer's license in Louisiana be renewed?
every two years
Life insurance replacement can be defined as
exchanging an existing policy for a new policy
The taxable portion of each annuity payment is calculated using which method?
exclusion ratio
Simon has purchased a fixed immediate annuity. His payment amount will be dependent upon principal, interest, and the contract's
income period
When a producer is replacing an existing ordinary life insurance policy, the producer must take all of the following actions EXCEPT provide the applicant with a copy of the sales proposal submit to the producer's insurance company a copy of the signed Notice Regarding Replacement provide the applicant with a Notice Regarding Replacement
obtain the beneficiary's signature
An interest-sensitive life insurance policyowner may be able to withdraw the policy's cash value interest free. The provision that allows this is called
partial surrender
